Farming's New Feudalism

Farming’s
New
Feudalism

Percy Schmeiser and Other Casualties of
Industrial Agriculture’s Drive to Own It All

Like thousands of others in southern Germany
in the late 19th century, Karl and Anna
Schmeiser worked long, hard days farming
a baron’s vast tracts of land to keep a roof
over their heads and food on the table. The baron
owned the land, the draft animals, the equipment, and
most of the crop—more or less as barons before him
had since the Middle Ages. Also like thousands, Karl
and Anna dreamed of a better life, and in 1890 they
scraped together every last pfennig and left Germany
forever, taking ship to the United States. Seeking cheap
land and independence, they eventually moved northward
to the prairies of western Canada, settling in
Saskatchewan in 1904.

A century later, the land is no longer so cheap. The
independence Karl and Anna found is threatened too,
as grandson Percy Schmeiser and his wife Louise discovered
in 1998. That’s when Monsanto Corporation
sued them after their canola seed was found to contain
the company’s patented, herbicide-resistant genes.*
The case generated worldwide headlines, and an
uncertain future for many farmers. Although the
Schmeisers ultimately didn’t have to pay Monsanto, the
courts did find them guilty of patent infringement.
The fact that a transnational corporation would persecute
small farmers is troubling to many, and shows the
depth and breadth of a decades-long transformation:
the steady erosion of farmers’ practice of developing and
saving seeds. “Neither I nor my parents or grandparents
ever envisioned farmers losing control of their
seed,” Schmeiser says.

Moreover, that’s just the tip of the canola stalk. The
privatization of seed is but one part of the steady consolidation
of economic power throughout agriculture.
Large agro-industrial and retail corporations have now
secured toeholds in every phase of the farming cycle:
they own seed and seed patents, they control processing
facilities, they dominate the retail sector, and they
have even moved into financing farmers’ operations. It’s
as if the barons have arisen from the grave and brought
the old feudal system back with them. The corporations
that control poultry and hog farming have already
reduced many livestock farmers to contract labor, and
grain farmers like Percy Schmeiser seem headed for
the same fate.

Until recently in its 10,000-year history, agriculture was
more a way of life than an industry. Farmers were the
seed producers and the guardians of societies’ crop
heritage. But by the early 1900s, the U.S. and Canadian
governments began promoting the development
of large export-oriented agriculture industries based on
only a few crops and livestock species. To maximize uniformity
and yields, seed breeding moved off the farm
and into centralized public research centers, such as U.S.
land grant universities. Variety development became
commodity-oriented.

Scientific advances in the 1970s and ’80s heralded
a new era in agriculture. To boost flat sales, Monsanto
and other agrichemical companies ventured into genetic
engineering and transformed themselves into the biotechnology
industry. They bought out traditional seed companies
and engineered their herbicide-resistant genes into
the newly acquired seed lines. Although the lower-cost,
traditional seed lines simultaneously became less available,
to maximize profits the industry needed farmers
to buy new seed every year instead of saving it.
This was a new arrangement. In the past, the public
institutions in North America that bred seed varieties
enjoyed a measure of intellectual property
protection under the U.S. Plant Variety Protection Act
or Canada’s Plant Breeders’ Rights Act. The institutions
licensed companies to sell the seed to farmers and usually
claimed a royalty. Farmers were permitted to save
successive generations of seed for planting on their
own farms. Arguably, this was a fairer system, but hardly
profitable for a multinational biotechnology industry
busy absorbing seed companies.

Patents changed this relationship. When coupled
with contracts that enforced the patent rights, they
provided the means of legal control over seeds needed
to increase profits. The U.S. Patent and Trademark
Office began issuing patents for genetically modified
organisms, and later for seeds, in the 1980s and has
granted more than 2,000 (for both genetically modified
and conventional varieties) since 1985. Monsanto
and the other companies’ aim, according to Devlin
Kuyek, a researcher with the NGO Genetic Resources
Action International, was “proprietary control of seeds
as a way to build new markets and secure their positions
in a restructured global agri-food system.” That
transition could only be fully realized through commodifying
seed, “the use of biological means, such as
genetic engineering, and social means, such as patents,
to prevent seed saving practices and guarantee monopoly
rights over seeds.” The strategy has been especially
successful for Monsanto, which may already control as
much as 90 percent of crop germ plasm (the hereditary
material, or genes) in the United States, according
to Neil Harl, a retired agricultural law and economics
professor at Iowa State University. (Monsanto argues
that growers do have a choice, and that hundreds of
thousands of them are using the company’s technology
in various crops and are satisfied with it.)

Contracts are also used with non-patented seed
varieties. Saskatchewan farmer and writer Paul Beingessner
points to two new public, non-patented wheat varieties.
The public institution that developed the seed,
which is protected under Canada’s Plant Breeders’
Rights law, licensed it to a private company, Quality
Assured Seed, to multiply and sell to farmers. However,
farmers wishing to grow this wheat must agree contractually
not to save successive generations of seed, but
instead buy new seed yearly. And they have to deliver
the wheat crop to Pioneer or Cargill.

With the profitability of seed increasing over the last
15 years, largely because of patents and contracts, the
money and incentive for public institutions to develop
new varieties are declining. Farmers also are saving less
seed. With the introduction of genetically modified
soybeans, for example, the rate of U.S. soybean seed
saving dropped from 31 percent in 1991 to 10 percent
a decade later (in terms of total acreage planted with
saved seed), according to Michigan State University professor
Lawrence Busch. He estimates that change yielded
an additional $374 million in seed industry profits in
2001. Percy Schmeiser’s own back-of-the-envelope
arithmetic leads him to believe the whole set-up is
quite profitable for Monsanto. Exhibit A is Monsanto’s
patented Roundup Ready canola seed, a genetically
engineered variety designed to tolerate glyphosate, the
active ingredient in the company’s Roundup brand
herbicide. In 1998 (the year Monsanto sued the
Schmeisers), Monsanto’s technology fee was C$15
(about US$12) per acre, seed was C$25 per acre, and
Roundup was about C$9 per acre, for a total of about
C$49 per acre. In contrast, the grower of a conventional
variety paid about C$15 per acre (C$5.50 for seed and
C$9–10 for chemicals). Schmeiser’s total costs were even
lower (C$5) because he saved the seed that he and
Louise had developed over decades. In 2003, according
to Devlin Kuyek, Monsanto was ranked third in pesticide
sales (nearly US$3.1 billion) and second in seed
sales (US$1.6 billion).

Monsanto vs. Schmeiser

So there’s a lot at stake, which explains why the industry
has taken off the gloves.

To protect its Roundup Ready genes in soybeans,
corn, cotton, and canola, Monsanto has investigated
hundreds of farmers for patent infringement or breach
of contract. It has sued 90 farmers in 25 states and won
over $15 million in judgments, according to the Center
for Food Safety, a Washington, D.C.-based NGO.

Monsanto sued the Schmeisers after seeds from their
canola harvest were found to contain the genes. After
losing at the trial and appeals court levels, Schmeiser,
who has always maintained his innocence, took his case
to the Supreme Court of Canada. Last May the high
court ruled that he had infringed the patent on the gene
because it was present in the seed from his canola field.

The decision reaffirmed that while genes and cells
are patentable under Canadian law, seeds, plants, and
other higher life forms are not. Obviously the gene and
cell are part of the seed and plant, however—which
might suggest that Monsanto is trying to extend the
reach of the patent. (Schmeiser’s lawyer, Terry Zakreski,
made that argument without success.) But in a 5-to-4
decision, the justices ruled that Schmeiser owed Monsanto
none of his profits because he had not made
money from its patented invention: “Their profits were
precisely what they would have been had they planted
and harvested ordinary canola…. Nor did they gain any
agricultural advantage from the herbicide resistant
nature of the canola, since no finding was made that
they sprayed with Roundup herbicide to reduce weeds.

The appellants’ profits arose solely from qualities of their
crop that cannot be attributed to the invention.” Surprisingly,
given that Schmeiser lost, the Supreme Court
also ruled that he didn’t have to pay Monsanto’s legal
expenses. (All he has to do is pay his own C$400,000
legal bill.)

Agricultural law professor Roger McEowen, Neil
Harl’s successor at Iowa State, believes the ruling set
the stage for a future “innocent infringement” defense
that could hinder Monsanto’s ability to capture revenues
from its technology. Monsanto disputes that interpretation.
All one need do, says Monsanto Canada spokeswoman
Trish Jordan, is read Paragraph Two of the
decision to understand that the justices weren’t concerned
with accidental or innocent infringement: “In
reaching this conclusion, we emphasize from the outset
that we are not concerned here with the innocent
discovery by farmers of ‘blow-by’ patented plants on
their land or in their cultivated fields.” The key feature
of the Court’s decision, Jordan says, is that it declared
the patent valid.

While McEowen agrees that innocent infringement
was not the issue in this case, he says altered circumstances
likely would have changed the outcome. Percy
Schmeiser learned that the stray canola plants growing
in ditches and around power poles on his property
contained Monsanto’s genes when they didn’t die after
a shot of Roundup, yet he saved and replanted seed from
his harvest without informing Monsanto. In short, he
“used” the invention without permission, and so was
not an “innocent” infringer. But what if he’d been
unaware that the genes were present in his canola (or
knew and immediately called Monsanto), and the company
sued him anyway?

Part of the answer lies in the paragraph Jordan
mentioned, McEowen says: “The justices were foretelling
that had the facts involved been a case of innocent
infringement, the outcome might well have been
different, and that point is bolstered by subsequent language
in the Court’s opinion. As a result of this case,
Monsanto’s patent is not as ironclad as they thought.”
This argument is bolstered by a U.S. case, in which a
federal appellate judge’s opinion used a hypothetical
patented corn to describe the ease with which a selfreplicating
organism could lead to inevitable patent
infringement. In light of these two cases, McEowen
thinks Monsanto eventually will have to back off unless
it can muster solid evidence of intentional infringement.
Some farmers, unwilling to risk going to court,
will sign the technology user agreements and get on
board. The rest will need to document seed purchases
and cultivation and harvesting practices to show they
didn’t deliberately infringe on the patent.

Contracting Options

Agribusiness consolidation in seeds, chemicals, and
meatpacking is one effect of the structural economic
transformation since World War II that emphasizes
global free trade. But allowing consolidation to proceed
unchecked eventually leaves farmers with few
sources for inputs (such as seeds) and few buyers for
their crops or livestock. The fewer buyers there are, the
more effectively they can set prices (a condition called
monopsony)—and of course they will want prices low.
The result, for farmers, is debt: too little income compared
with expenses. “Farmers got more for a bushel
of wheat in 1978 than they do now, yet no one wants
to talk about the increased costs of inputs, so no wonder
they can’t make it,” Schmeiser says.

Debt is driving many farmers off the prairies of
western Canada. Schmeiser divides the farmers into
three categories. One-third, including himself, has no
land- or machinery debt. One-third has debt, but it’s
manageable. The final third of farmers owes money for
land, machinery, and other things as well. They are the
ones losing their farms. With fewer farmers on the
land, the knowledge base is declining, replaced by corporate
interests that advise yet
more purchases of expensive technologies
and inputs. Those will
help commodity crop growers produce
an even bigger supply of food
and feed that further drives down
the prices they receive.

The story is similar in the
United States. According to the
University of Tennessee’s Agricultural
Policy Analysis Center,
since the late 1980s “government’s
official policy has been to permit,
even encourage, a free fall in
domestic farm prices while simultaneously
promoting rapid liberal
trade measures to open new markets
for U.S. products.” The prices
farmers have received for a number
of commodity crops have
plummeted some 40 percent
since 1996, sometimes providing
“agribusiness and corporate livestock
producers access to agricultural
commodities at below the
cost of production, consolidating
their control over the entire production
and marketing chain.” The
government is using taxpayer dollars
to pay producers enough to at
least break even, in effect subsidizing
cheap grain. But they’re
also effectively subsidizing expensive
inputs, such as the patented
biotech seed mentioned earlier.
With U.S. budget deficits running high, the government
has come under pressure to reduce income support
payments (subsidies) to farmers. According to
media reports, the Bush administration has proposed
cutting the agriculture budget by 5 percent, including
an approximately 30-percent decrease in payments any
one farmer could receive. However, agribusiness’s desire
for cheap grain and livestock won’t diminish, nor will
their sway over policymakers, argues Roger McEowen.

With less support from the government, more farmers
will deem it necessary for economic survival to enter
contractual agreements (already a long-standing trend
in the Canadian and U.S. poultry and pork industries).
Contracts per se are not necessarily bad, but problems
emerge when heavy consolidation eliminates bargaining
power, often resulting in one-sided
arrangements favoring powerful companies. Such con-
solidation is well under way
throughout agriculture. In the
United States, for instance, nearly
two-thirds of pork packing is controlled
by four companies, according
to data compiled by Mary
Hendrickson and William Heffernan
of the University of Missouri.
Corporate market power
is similar in the grain sector. McEowen
says farmers could see realistic
marketing opportunities for
their corn, soybeans, or wheat
limited to grain elevators operated
by Archer Daniels Midland
(ADM) or Cargill, the two
biggest U.S. flour milling companies.
(ADM is also the biggest
U.S. soybean processor.)

The contract constraint is also
edging into farmers’ financing.
According to Neil Harl, the fewer
(but bigger) companies left in various
sectors of agribusiness,
through subsidiaries and partnerships,
increasingly can offer farmers
better terms for financing their
entire operations than local banks.
“It’s clear that, over the long term,
capital increasingly will be provided
along with inputs over
which the supplier has a monopoly
position,” Harl says. “The
general trend is toward the integrators
controlling a patented item
that the [farmer] wants, usually
seed, and then bundling that with
other inputs. The muscle of the firm that has the seed
is greater now that those can be patented.”

Monsanto, Pioneer, Cargill and other companies
offering such financing packages generally agree to
unbundle them at a farmer’s request. Failure to do so
would be a step over the line into a “tying contract”
that is illegal in the United States. However, farmers
experience a number of pressures to opt for bundled
contracts. Fellow farmers, seed and input sellers, equipment
dealers, and others may tell them that a contract
is the best way to go—peer pressure, in short. Some
farmers, in deep financial trouble, can’t afford to buy
inputs, so they opt for a production or marketing contract
that offers less risk and a guaranteed return
(depending on the terms of the contract, of course.)
Still others simply don’t like marketing and see contracts
as a means of avoiding it.

Harl emphasizes that farmers must read these contracts,
including the fine print. Some don’t. Percy
Schmeiser recently met a sadder-but-wiser farmer who
had contracted with a company to supply most of his
seed, and all the fertilizer, chemicals, and fuel. He harvested
the crop and delivered enough of it to the company’s
elevator to pay the value of the loan for the
inputs, intending to sell the rest to other buyers offering
a higher price. But the contract called for him to
deliver all his crop to the company at its price. This is
but one case of farmers signing away the rights to market
their harvests and, increasingly to decide how they
grow the grain, he says.

For farmers, the world is closing in and options are
disappearing. Biotech crops, for instance, are clearly a
bad deal in many ways—farmers can’t save the seed, they
risk litigation from drifting patented traits, weeds are
developing herbicide resistance, and important markets
may decline to buy biotech food. So why are so many
choosing to plant them?

To stay competitive. Grain processors want to buy
soybeans, corn, and wheat as cheaply as possible—and
in a free-trade world, they can just as easily buy from
Brazil or China as they can from Canada or the United
States. Farmers respond by trying to compete on volume,
growing as much as possible to overcome low
prices. And Roundup Ready soybeans are easier to
manage, which allows farmers to farm more acreage with
the same amount of labor and equipment, says Indiana
farmer Troy Roush.

“The trouble is, there is only a finite amount of land
available, so this puts fellow farmers at each other’s
throats as we seek to rent and purchase additional
land,” Roush says. “What used to be a tight, vibrant,
functioning community is reduced to petty fighting for
land.” When one of Roush’s neighbors called Monsanto
and accused him of illegally saving seed, the company
sued. “[It] cost us $400,000 by forcing us to defend
a baseless claim by Monsanto. So the next time a farm
comes up for sale, we may not be as competitive. The
end result is a destruction of the social fabric of rural
America. All because multinational corporations hold
patents on life.”

Concentration Is Not a Game

Roger McEowen recommends some remedies for what
ails agriculture. First, return to a policy of managing
supply, of producing only what is needed for the marketplace.
This would eliminate costly surpluses that
drive down the prices farmers receive and which waste
natural resources better preserved for future generations.
Second, replace welfare-style income supports (subsidies)
with price supports. Long a part of U.S. agricultural
policy before their elimination in the 1996 farm
bill, price supports worked much like the minimum
wage, establishing minimum prices for farmers’ crops.
Buyers were legally required to pay at least that amount,
but before rampant consolidation, more buyers in the
market meant the producer prices were often bid
upward, so farmers actually made money.

According to Devlin Kuyek, the top 10 biotech
companies controlled about one-third of the global
seed market; four companies controlled 86 percent of
the corn seed market and 49 percent of the soybean seed
market. That’s why Neil Harl thinks it’s also crucial to
enforce anti-trust laws: “We have towering concentration
on the input side and towering concentration on
the output side, which is a problem. Does this country
want producers to be transformed into serfs or does
it want them to be independent entrepreneurs? If it’s
the latter, then we must work toward meaningful competition…
and it means effective anti-trust policy.”

Corrective or preventive measures of some kind are
needed worldwide, because increasing corporate control
of the seed industry and the associated decline of seed
saving isn’t restricted to Canada and the United States.
The worldwide commercial seed market is $23 billion,
says Hope Shand of ETC Group, a Canadian NGO. It’s
mostly concentrated in North America and Europe, and
prospects for further growth there are limited. But in the
global South, home to the vast majority of the 1.4 billion
people who depend on farm-saved seed, the market
could be worth another $20 billion or more. No
wonder seed giant Syngenta applied for a multi-genome
patent in 115 countries that would give it monopoly
power over the flowering sequences of some 40 plants.

Under pressure from ETC and others, Syngenta
recently withdrew its application. But enforcing patents
in many different developing nations with evolving
laws could prove difficult, anyway. An easier strategy
might lie in biological controls such as the Terminator.
This genetic modification makes second-generation
seed sterile. Farmers could plant Terminator seed and
harvest a crop, but if they saved and planted the second
generation of seed, it wouldn’t grow. This renders
contracts and patents irrelevant; farmers would simply
have no choice but to buy new seed every year. (Since
1998, there has been a United Nations-brokered global
moratorium on such technologies. Canada tried but
failed to break the moratorium at a February UN meeting
in Bangkok.)

Percy Schmeiser fears for the future of North American
and world agriculture. “Farmers are going out of
business because they can’t make it in the face of markets
manipulated by corporations. The corporations
are becoming the barons and lords, which are what my
grandparents thought they’d escaped.”

Robert Schubert is editor of CropChoice, an online
news service providing alternative news and commentary
about genetically modified seeds and crops,
agribusiness trends and practices, alternative energy,
and sustainable agriculture.

For more information about issues raised in this story, visit
www.worldwatch.org/ww/feudal/.